Foreign Stock Funds Explained

The economy of every country and region in the world is different from one another. There are regions that have booming economies. International stocks offer the best diversification for a trader's portfolio with many equities from the U.S.

A fund that has a manager with a good reputation is usually the best choice to make. It is necessary to have a manager because the research for this fund is generally scarce and the companies abroad can be very hard to track if solely done by the investor.

These funds allow the investors the exposure to markets abroad at different risk levels. While there are some funds that can be quite tame however there are still some which can very terrible. An example is the summer of the year 1998, when the economies of Asia went down. Ivy Developing Nations, Pioneer Emerging Markets and other funds with the same exposure in Asia were hammered. The fluctuations in the currency will still have a bad effect on the stock rates despite the fact that the international economies are doing quite well.

However the risks on currencies and the economy can also change into a positive quickly. This is the reason why diversification is still the best way to manage the risks. The funds invested in other countries can be categorized as global, emerging market, country specific and international. There will be lesser risks if the fund's reach is wider.

Global Funds
Among the categories these global funds are the most varied. However people should not be fooled by the sound of the name alone. These funds can be invested in any part of the globe which includes U.S., which is the reason why these funds cannot give more diversification as one would hope for an international fund. Global funds can be the safest type among the four but that is only because these funds usually depend on the popular stocks in U.S.

International Funds
Most of the assets of international funds can be invested outside the United States. This choice depends on the choice of country for the investment since these funds can become quite safe to very risky. The best decision an investor can make is choosing a good fund characterized with a good balance. The manager of these funds should also make sure that funds moves in and out of the regions with profits.

Country-Specific Funds
Country-Specific funds are invested in one region or country. This type of concentration can give these funds volatility. Choosing a good country is a crucial decision. Most of the investors who venture into this type of funds are sophisticated.

Emerging-Market Funds
These funds has the greatest volatility among the four categories. They are invested in underdeveloped countries but have great potential for economic growth. However these can be risky due to political crisis, collapse of the currency and corruption. It is best to risk money which the investor can afford to lose.